<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(MARK ONE)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transaction period from ______ to ________
COMMISSION FILE NUMBER 333-8305
UTG COMMUNICATIONS INTERNATIONAL, INC.
(Exact name of small business issuer as specified in its charter)
DELAWARE 13-3895294
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Baarerstrasse 75, 6300, ZUG, SWITZERLAND NOT APPLICABLE
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 011-4141-729-8282
NOT APPLICABLE
(Former Name, Former Address and Former Year, If Changed Since Last Report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes No X
----- ------
10,406,000 shares of Common Stock were outstanding on October 18, 1996.
Transitional Small Business Disclosure Format (check one):
Yes No X
----- -----
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
UTG COMMUNICATIONS INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE PERIOD FROM APRIL 1, 1996 TO JUNE 30, 1996
INDEX
Consolidated Balance Sheet (Unaudited) 3
Consolidated Statement of Operations (Unaudited) 4
Consolidated Statement of Stockholders' Equity (Unaudited) 5
Consolidated Statement of Cash Flows (Unaudited) 6
Notes to Consolidated Financial Statements 7-10
Consolidating Balance Sheet (Unaudited) 11
Consolidating Statement of Operations (Unaudited) 12
-2-
<PAGE>
UTG COMMUNICATIONS INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (UNAUDITED)
JUNE 30, 1996
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents $ 2,727,328
Prepaid Expenses and Other Current Assets 195,493
Due from Affiliate 174,822
-----------
Total Current Assets 3,097,643
Property and Equipment, at Cost,
Net of Accumulated Depreciation of
$58,109 at June 30, 1996 1,198,110
Organization Costs, Net of Accumulated
Amortization of $955 at June 30, 1996 15,232
Deferred Taxes -
Other Assets 10,761
-----------
Total Assets $ 4,321,746
-----------
-----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable and Accrued Expenses $ 1,057,181
Loan Payable
1,000,000
-----------
Total Current Liabilities 2,057,181
-----------
Commitments and Contingencies
STOCKHOLDERS' EQUITY
Common Stock - $0.00001 Par Value
Authorized 20,000,000 shares;
10,006,000 Issued and Outstanding 100
Additional Paid-in-Capital 3,088,474
Retained Deficit ( 781,334)
Foreign Currency Translation Adjustment ( 42,692)
Minority Interest 17
-----------
Total Stockholders' Equity 2,264,565
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 4,321,746
-----------
-----------
-3-
<PAGE>
UTG COMMUNICATIONS INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE PERIOD FROM APRIL 1, 1996 TO JUNE 30, 1996
NET SALES $ 25,243
COST OF SALES 62,640
-----------
GROSS PROFIT ( 37,397)
-----------
SELLING AND TECHNICAL EXPENSES
Consulting Fees 112,665
Technical Fees 46,695
Sales Salaries 29,011
Other Selling Expenses 9,183
-----------
Total Selling and Technical Expenses 197,554
-----------
LOSS FROM OPERATIONS BEFORE
GENERAL AND ADMINISTRATIVE EXPENSES ( 234,951)
-----------
GENERAL AND ADMINISTRATIVE EXPENSES
Salaries 156,559
Travel Expenses 93,138
Management and Consulting Fees 96,586
Depreciation and Amortization 59,900
Professional Fees 58,182
Employment Agency Fees 22,337
Insurance Expense 14,061
Rent Expense 10,310
Other Operating Expenses 25,734
-----------
Total General and Administrative Expenses 536,807
-----------
LOSS FROM OPERATIONS ( 771,758)
OTHER (INCOME) EXPENSES
Interest Income ( 9,470)
Interest Expense 19,453
Loss From Foreign Currency ( 407)
-----------
Total Other Expenses 9,576
-----------
NET LOSS $( 781,334)
-----------
-----------
LOSS PER COMMON SHARE
Primary $( .08)
-----------
-----------
Fully Diluted $( .08)
-----------
-----------
-4-
<PAGE>
UTG COMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED)
FOR THE PERIOD FROM APRIL 1, 1996 TO JUNE 30, 1996
<TABLE>
<CAPTION>
Common Stock Additional Foreign Total
------------------------ Paid-In Accumulated Currency Minority Stockholders'
Shares Amount Capital Deficit Adjustment Interest Equity
------------------------ ------------ ----------- ------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at March 31, 1996 - - $ - $ - $ - $ - $ - $ -
Net Loss - - - (781,334) - - (781,334)
Issuance of Common Stock 10,006,000 100 3,088,474 - - - 3,088,574
Foreign Currency
Translation Adjustment - - - - ( 42,692) - ( 42,692)
Minority Interest - - - - - 17 17
---------- ----- ----------- --------- ---------- ----- -----------
Balance at June 30, 1996 10,006,000 $ 100 $ 3,088,474 $(781,334) $( 42,692) $ 17 $ 2,264,565
---------- ----- ----------- --------- ---------- ----- -----------
---------- ----- ----------- --------- ---------- ----- -----------
</TABLE>
-5-
<PAGE>
UTG COMMUNICATIONS INTERNATIONAL, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM APRIL 1, 1996 TO JUNE 30, 1996
CASH FLOW FROM OPERATING ACTIVITIES
Net Loss $( 781,334)
Adjustments to Reconcile Net Loss to
Net Cash Used by Operating Activities
Depreciation and Amortization 59,900
Changes in Certain Assets and Liabilities:
Increase in Prepaid Expenses ( 195,493)
Increase in Organization Costs ( 16,187)
Increase in Other Assets ( 174,822)
Increase in Due From Affiliate ( 10,761)
Increase in Accounts Payable and Accrued Expenses 1,057,181
------------
Total Cash (Used) by Operating Activities ( 61,516)
------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Fixed Assets (1,256,219)
------------
Total Cash (Used) By Investing Activities (1,256,219)
------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Contribution to Capital 3,088,574
Proceeds From Loan 1,000,000
Minority Interest 17
------------
Total Cash Provided By Financing Activities 4,088,591
------------
EFFECTS OF EXCHANGE RATE
CHANGES ON CASH ( 43,528)
------------
( 43,525)
------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 2,727,328
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR -
------------
CASH AND CASH EQUIVALENTS - END OF YEAR $ 2,727,328
------------
------------
CASH PAID DURING THE YEAR FOR:
Interest Expense $ 19,453
------------
------------
Income Taxes $
------------
------------
-6-
<PAGE>
UTG COMMUNICATIONS INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD FROM APRIL 1 TO JUNE 30, 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) BASIS OF PRESENTATION
The accompanying financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Regulation
S-B. In the opinion of management, all adjustments (consisting only
of normal recurring adjustments) considered necessary for a fair
presentation have been included.
For further information refer to the financial statements and
footnotes included in the Registrant's Prospectus on Form 10-KSB for
the period ended April 30, 1996.
The results of Operations for any interim period are not necessarily
indicative of the results to be expected for the full fiscal year
ended March 31, 1997.
The accompanying consolidated financial statements include the
accounts of UTG Communications International, Inc. ("The Company"), a
holding company organized under the laws of the state of Delaware on
April 17, 1996 and its subsidiaries:
1) UTG Communications Holding AG, ("UTGH"),incorporated under
the laws of Switzerland on February 29, 1996 (owned 99.9% by
the Company);
2) UTG Communications (Europe) AG, ("UTGAG"), incorporated
under the laws of Switzerland on March 28, 1996 (owned 100%
by UTGH),
3) UTG Communications Belgium, ("UTGBG"), Incorporated under
the laws of Belgium on June 27, 1996 (owned 100% by UTGH),
and
4) United Telecom GMBH, ("UTGmbH"), Incorporated under the laws
of Switzerland on May 28, 1996 (owned 100% by UTGH).
All significant intercompany accounts and transactions have been eliminated
in consolidation.
b) LINE OF BUSINESS
The Company is a switch-based provider of private voice, fax and data
management telecommunication services primarily in Switzerland.
c) CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with
original maturities of three months or less to be cash equivalents.
-7-
<PAGE>
UTG COMMUNICATIONS INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD FROM APRIL 1, 1996 TO JUNE 30, 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
d) ORGANIZATION COSTS
Organization costs consist of legal and other administrative costs
incurred relating to the formation of the Company. These costs have
been capitalized and will be amortized over a period of three years.
e) PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. Depreciation is computed
using the declining balance method based upon the estimated useful
lives of the various classes of assets. Maintenance and repairs are
charged to expense as incurred.
f) TRANSLATION OF FOREIGN CURRENCY
The Company translates the foreign currency financial statements of
its Switzerland subsidiaries, UTGH and UTGAG, in accordance with the
requirements of Statement of Financial Accounting Standards No. 52,
"Foreign Currency Translation". Assets and liabilities are translated
at current exchange rates, and related revenues and expenses are
translated at average exchange rates in effect during the period.
Resulting translation adjustments are recorded as a separate component
in stockholders' equity. Foreign currency transaction gains and
losses are included in determining net income.
g) USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
h) LOSS PER SHARE
Loss per share is based on the weighted average number of shares of
common stock outstanding during the period.
i) INCOME TAXES
Income taxes are provided for based on the liability method of
accounting pursuant to Statement of Financial Accounting Standards
(SFAS) No. 109, "Accounting for Income Taxes". The liability method
requires the recognition of deferred tax assets and liabilities for
the expected future tax consequences of temporary differences between
the reported amount of assets and liabilities and their tax basis.
-8-
<PAGE>
UTG COMMUNICATIONS INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD FROM APRIL 30, 1996 TO JUNE 30, 1996
NOTE 2 - LOAN PAYABLE
Financing for the start-up operations of UTGH was provided by a loan
agreement between UTGH and Hedag AG (HAG) dated March 27, 1996, for
$1,000,000 bearing interest at 7% per annum payable semi-annually on
September 30, 1996 and March 31, 1997.
The Company shall pay to HAG the entire principal balance of the loan,
plus any unpaid accrued interest by March 31, 1997.
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment at June 30, 1996 is summarized as follows:
Computer Equipment $ 58,674
Telecommunications Equipment 1,105,637
Furniture and Fixtures 91,908
-------------
1,256,219
Less: Accumulated Depreciation 58,109
-------------
$ 1,198,110
-------------
-------------
NOTE 4 - MINORITY INTEREST
Minority interest represents less than a 1% share of the common equity
and net loss of the Company's subsidiary UTGH.
NOTE 5 - FOREIGN OPERATIONS
Substantially all of UTGH's and UTGAG's operations take place in the
country of Switzerland.
Substantially all of UTGH's and UTGAG's identifiable assets are
located in the United Kingdom and Switzerland.
UTGB and UTGmbH are inactive companies as of June 30, 1996.
NOTE 6 - INCOME TAXES
Deferred income taxes are determined based upon differences between
the tax basis of the Company's assets and liabilities and their
financial statement carrying amounts, multiplied by the applicable
statutory income tax rate.
-9-
<PAGE>
UTG COMMUNICATIONS INTERNATIONAL, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD FROM APRIL 1, 1996 TO JUNE 30, 1996
NOTE 6 - INCOME TAXES (Continued)
Significant components of the Company's deferred tax liabilities and
assets are as follows:
Deferred Tax Assets
Net Operating Loss Carryforwards $ 781,334
Less: Valuation Allowance ( 781,334)
-----------
Total Deferred Tax Assets $ -
-----------
-----------
At June 30, 1996, the Company had a net operating loss which will be
available to reduce future taxable income. The full realization of
the tax benefit associated with the carryforward depends predominantly
upon the Company's ability to generate taxable income during the
carryforward period. Because of the current uncertainty of realizing
such tax asset in the future, a valuation allowance has been recorded
equal to the amount of the net deferred tax asset.
NOTE 7 - RELATED PARTY TRANSACTIONS
The Company has related party transactions with United Telegroup Ltd.
UK (UTK), a company with which it shares a common director.
NOTE 8 - COMMITMENTS AND CONTINGENCIES
The Company has several employment agreements, the terms of which
expires at various times through April 1999.
NOTE 9 - SUBSEQUENT EVENTS
1) On July 4, 1996, subsequent to the date of the balance sheet, the
Company repaid the entire principal balance of $1,000,000 plus accrued
interest of $19,444, relating to their loan from HAG. See also Note
2.
2) On August 15, 1996, subsequent to the date of the balance sheet, the
Company entered into a subscription agreement to sell 400,000 shares
of its common stock to Interfinance Inv. Co., Ltd. for an aggregate
price of $1,000,000 consisting of $10,000 in cash and a secured
promissory note dated August 15, 1996 in the amount of $990,000. The
note provides for interest at the rate of 7% per annum on the
principal balance and matures on February 1, 1997. The note is
secured by the aforementioned 400,000 shares of common stock being
purchased through this subscription agreement. As of October 21,
1996, this note has been paid down to a remaining principal balance
of approximately $240,000.
It is agreed by the parties that the stock certificate representing
the shares shall be issued by the Company within 10 days of the
effective date of a registration statement covering the shares.
-10-
<PAGE>
UTG COMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEET
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
UTG UTG
Communications UTG Communications UTG
International Communications (Europe) Communications
Inc. Holding AG AG Belgium
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
CURRENT ASSETS
Cash and Cash Equivalents $ 181,939 $ 2,324,136 $ 173,659 $ 39,826
Prepaid Expenses and Other Current Assets 15,443 403 179,647 -
Due from Affiliate 2,800,000 1,376,978 10,401 -
---------- ----------- ----------- --------
Total Current Assets 2,997,382 3,701,517 363,707 39,826
Property and Equipment - - 1,198,110 -
Organization Costs - 1,251 12,240 1,542
INVESTMENT IN SUBSIDIARIES 83,074 139,261 - -
OTHER ASSETS - - 10,761 -
---------- ----------- ----------- --------
TOTAL ASSETS $3,080,456 $ 3,842,029 $ 1,584,818 $ 41,368
---------- ----------- ----------- --------
---------- ----------- ----------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable and Accrued Expenses $ - $ 18,990 $ 1,038,191 $ -
Due to Affiliate - 2,807,859 1,211,01 51,542
Loan Payable - 1,000,000 - -
---------- ----------- ----------- --------
Total Current Liabilities - 3,826,849 2,249,206 1,542
---------- ----------- ----------- --------
STOCKHOLDERS' EQUITY
Common Stock 100 83,091 83,717 39,826
Additional Paid-in Capital 3,088,474 - - -
Retained Deficit ( 8,118) ( 18,588) ( 754,625)
Foreign Currency Translation
Adjustment - ( 49,323) 6,520
Minority Interest - - - -
---------- ----------- ----------- --------
TOTAL STOCKHOLDERS' EQUITY 3,080,456 15,180 ( 664,388) 39,826
---------- ----------- ----------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $3,080,456 $ 3,842,029 $ 1,584,818 $ 41,368
---------- ----------- ----------- --------
---------- ----------- ----------- --------
</TABLE>
<TABLE>
<CAPTION>
United
Telecom
GMBH Subtotal Elimination Total
---------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
CURRENT ASSETS
Cash and Cash Equivalents $ 7,768 $ 2,727,328 $ $ 2,727,328
Prepaid Expenses and Other Current Assets - - 195,493 195,493
Due from Affiliate 7,859 4,195,238 (4,020,416) 174,822
---------- ----------- ----------- -----------
Total Current Assets 15,627 7,118,059 (4,020,416) 3,097,643
Property and Equipment - 1,198,110 - 1,198,110
Organization Costs 199 15,232 - 15,232
INVESTMENT IN SUBSIDIARIES 222,335 ( 222,335) -
OTHER ASSETS - 10,761 - 10,761
---------- ----------- ----------- -----------
TOTAL ASSETS $ 15,826 $ 8,564,497 $(4,242,751) $ 4,321,746
---------- ----------- ----------- -----------
---------- ----------- ----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable and Accrued Expenses - $ 1,057,181 $ $ 1,057,181
Due to Affiliate - 4,020,416 (4,020,416) -
Loan Payable - 1,000,000 - 1,000,000
---------- ----------- ----------- -----------
Total Current Liabilities - 6,077,597 (4,020,416) 2,057,181
---------- ----------- ----------- -----------
STOCKHOLDERS' EQUITY
Common Stock 15,718 222,452 ( 222,352) 100
Additional Paid-in Capital - 3,088,474 - 3,088,474
Retained Deficit - ( 3) ( 781,334) ( 781,334)
Foreign Currency Translation
Adjustment - ( 42,692) - ( 42,692)
Minority Interest 111 - 17 17
---------- ----------- ----------- -----------
TOTAL STOCKHOLDERS' EQUITY 15,826 2,486,900 ( 222,352) 2,264,565
---------- ----------- ----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 15,826 $ 8,564,497 $(4,242,751) $ 4,321,746
---------- ----------- ----------- -----------
---------- ----------- ----------- -----------
</TABLE>
-11-
<PAGE>
UTG COMMUNICATIONS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEET (UNAUDITED)
FOR THE PERIOD FROM APRIL 1, 1996 TO JUNE 30, 1996
<TABLE>
<CAPTION>
UTG UTG
Communications UTG Communications UTG
International Communications (Europe) Communications
Inc. Holding AG AG Belgium
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
NET SALES $ - $ - $ 25,243 $ -
COST OF SALES - - 62,640 -
---------- ----------- ----------- -----------
GROSS PROFIT - - ( 37,397) -
---------- ----------- ----------- -----------
SELLING AND TECHNICAL EXPENSES
Consulting Fees - - 112,665 -
Technical Fees - - 46,695 -
Sales Salaries - - 29,011 -
Other Selling Expenses - - 9,183 -
---------- ----------- ----------- -----------
Total Selling and Technical Expenses - - 197,554 -
---------- ----------- ----------- -----------
LOSS FROM OPERATIONS BEFORE GENERAL AND
ADMINISTRATIVE EXPENSES - - (234,951) -
---------- ----------- ----------- -----------
OPERATING EXPENSES
Salaries 15,500 - 141,059 -
Travel Expenses - - 93,138 -
Management and Consulting Fees - - 96,586 -
Depreciation and Amortization Expense - 174 59,726 -
Professional Fees - - 58,182 -
Employment Agency Fees - - 22,337 -
Insurance Expense - - 14,061 -
Rent Expense - - 10,310 -
Other Operating Expenses - 235 25,496 -
---------- ----------- ----------- -----------
Total General and Administrative Expenses 15,500 409 520,895 -
---------- ----------- ----------- -----------
LOSS FROM OPERATIONS (15,500) ( 409) (755,846) -
OTHER (INCOME) EXPENSE
Interest Income ( 7,382) ( 2,035) ( 53) -
Interest Expense - 19,447 6 -
Loss From Foreign Currency - 767 ( 1,174) -
---------- ----------- ----------- -----------
( 7,382) 18,179 ( 1,221) -
---------- ----------- ----------- -----------
NET LOSS $ ( 8,118) $ ( 18,588) $ (754,625) $ -
---------- ----------- ----------- -----------
---------- ----------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
United
Telecom
GMBH Subtotal Elimination Total
---------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
NET SALES $ - $ 25,243 $ - $ 25,243
COST OF SALES - 62,640 - 62,640
---------- ----------- ----------- -----------
GROSS PROFIT - ( 37,397) - ( 37,397)
---------- ----------- ----------- -----------
SELLING AND TECHNICAL EXPENSES
Consulting Fees - 112,665 - 112,665
Technical Fees - 46,695 - 46,695
Sales Salaries - 29,011 - 29,011
Other Selling Expenses - 9,183 - 9,183
---------- ----------- ----------- -----------
Total Selling and Technical Expenses - 197,554 - 197,554
---------- ----------- ----------- -----------
LOSS FROM OPERATIONS BEFORE GENERAL AND
ADMINISTRATIVE EXPENSES - ( 234,951) - (234,951)
---------- ----------- ----------- -----------
OPERATING EXPENSES
Salaries - 156,559 - 156,559
Travel Expenses - 93,138 - 93,138
Management and Consulting Fees - 96,586 - 96,586
Depreciation and Amortization Expense - 59,900 - 59,900
Professional Fees - 58,182 - 58,182
Employment Agency Fees - 22,337 - 22,337
Insurance Expense - 14,061 - 14,061
Rent Expense - 10,310 - 10,310
Other Operating Expenses 3 25,734 - 25,734
---------- ----------- ----------- -----------
Total General and Administrative Expenses 3 536,807 - 536,807
---------- ----------- ----------- -----------
LOSS FROM OPERATIONS ( 3) ( 771,758) - (771,758)
OTHER (INCOME) EXPENSE
Interest Income - ( 9,470) - ( 9,470)
Interest Expense - 19,453 - 19,453
Loss From Foreign Currency - ( 407) - ( 407)
---------- ----------- ----------- -----------
- 9,576 - 9,576
---------- ----------- ----------- -----------
NET LOSS $ ( 3) $ ( 781,334) $ - $ (781,334)
---------- ----------- ----------- -----------
---------- ----------- ----------- -----------
</TABLE>
-12-
<PAGE>
Item 2. Plan of Operation
The Company is a development stage company that provides quality private
voice, fax and data management telecommunications services in Switzerland,
Belgium and Germany, primarily to business and business groups at prices which
are generally below those of major telecommunications carriers. During the 12
month period following June 30, 1996, the Company intends to focus on expanding
its customer base in Switzerland, and also intends to expand its customer base
in Belgium and Germany, where the Company has recently commenced operations.
The Company will also explore expansion possibilities in other countries of the
European Union (the "EU") if business and regulatory conditions warrant. The
Company has entered into international telecommunications service agreements
with various international telecommunications carriers for the exchange of
traffic. Pursuant to these agreements, the Company will, by the end of November
1996, re-sell telecommunication minutes on its bandwidth at a profit. The
Company intends to upgrade its network and information systems as required to
remain competitive. The Company believes that its current level of employees is
sufficient for its current operations. As the Company expands, it intends to
hire additional employees to meet its needs.
The Company raised approximately $4 million from recent private placements,
of which approximately $3,760,000 was received in cash and the remaining
approximately $240,000 is represented by a promissory note which is payable to
the Company on or before February 1, 1997. On September 6, 1996, the Company's
registration statement registering shares of the Company's Common Stock for
selling stockholders was declared effective by the Securities and Exchange
Commission. The Company did not receive any proceeds in connection with such
registration. The Company used the funds raised in its private placements to
repay a $1 million loan from Hedag AG, together with $19,444 in interest, to
purchase approximately $1 million in equipment, for the establishment of its
business, including legal, accounting and consulting fees, for expenses incurred
in connection with its registration statement and for working capital and
general corporate purposes. The Company has begun to generate limited revenue
from operations.
The Company has experienced unanticipated delays and cost overruns in
setting up its network. The Company believes that its new switch will be
operational by November 1, 1996. Once the new switch becomes operational, the
Company believes that its network will have adequate capacity for the next six
months. Following such six month period, the Company believes it will need to
expand the capacity of its network to meet its projected higher level of
operations. There can be no assurance that the Company's business will expand
or that if such expansion occurs that the Company will have adequate capital
resources.
The Company believes that its current cash and revenue from operations,
together with funds expected to be received from refinancing its newly purchased
equipment pursuant to lease financing transactions which should be in place by
the end of November, will be sufficient to maintain the Company's operations at
their current level for the 12 month period following June 30, 1996. In order to
finance its projected expansion during such 12 month period, including financing
any expansion into other countries of the EU, or pursue any strategic
investments or joint ventures during the next 12 months, the Company will need
additional financing. In this regard the Company has been exploring various
financing options including, the issuance of equity and/or debt and various
asset based financing and lease financing options. The need for additional
financing and the timing of such financing will depend on the Company's future
operating revenue and future expansion plans, which are subject to change over
time. Additionally, the Company may be further required to seek additional
financing during such period in the event of delays, costs overruns or
unanticipated expenses. There can be no assurance that the Company will ever
generate sufficient revenue to produce an operating profit. While the Company
believes that it will be able to raise the capital it will require to fund its
current operations and its projected expansion plans, there can be no assurance
that the Company will be able to obtain such additional financing or that such
financing, if available, will be on acceptable terms. If the Company is unable
to arrange for such financing the Company would be materially and adversely
affected and could have to substantially reduce operations.
-13-
<PAGE>
Certain statements in this Report under the caption "Plan of Operation"
constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995, including, without limitation,
statements regarding future cash requirements. Such forward-looking statements
involve known and unknown risks, uncertainties and other factors which may cause
the actual results, performance or achievements of the Company, or industry
results, to be materially different from any future results, performance, or
achievements expressed or implied by such forward-looking statements. Such
factors include, among others, the following: delays in expanding the Company's
network; failure to receive or delays in receiving regulatory approval; general
economic and business conditions; industry capacity; industry trends;
demographic changes; competition; material costs and availability; the loss of
any significant customers; changes in business strategy or development plans;
quality of management; availability, terms and deployment of capital; business
abilities and judgment of personnel; availability of qualified personnel;
changes in, or the failure comply with, government regulations; and other
factors referenced in this Report.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Items 2 - 5. Not applicable
Item 6. Exhibits and Report on Form 8-K
(a) Exhibits
27 Financial data schedule
(b) Reports on Form 8-K
There were no reports on form 8-K filed during the quarter ended June 30, 1996
-14-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned.
UTG COMMUNICATIONS INTERNATIONAL, INC.
By: /s/ Ronald Kuzon
-----------------------------------
Ronald Kuzon
Treasurer and Secretary
Principal Financial Officer
October 18, 1996
-15-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM UTG
COMMUNICATIONS, INC. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) FOR THE PERIOD FROM APRIL 1, 1996 TO JUNE 30, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 2727328
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3097643
<PP&E> 1256219
<DEPRECIATION> 58109
<TOTAL-ASSETS> 4321746
<CURRENT-LIABILITIES> 2057181
<BONDS> 0
0
0
<COMMON> 100
<OTHER-SE> 2264465
<TOTAL-LIABILITY-AND-EQUITY> 4321746
<SALES> 25243
<TOTAL-REVENUES> 25243
<CGS> 0
<TOTAL-COSTS> 797001
<OTHER-EXPENSES> (9877)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19453
<INCOME-PRETAX> 781334
<INCOME-TAX> 0
<INCOME-CONTINUING> (781334)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (781334)
<EPS-PRIMARY> (.08)
<EPS-DILUTED> (.08)
</TABLE>
